South Carolina panel advances pension reform

COLUMBIA, S.C. (AP) — A bill meant to shore up South Carolina's pension system for roughly 220,000 public workers is heading to the House floor.

The Ways and Means Committee unanimously approved Tuesday a bill requiring newly hired employees to work an additional two years to collect full retirement benefits, while current employees could still retire after 28 years.

It would require workers to contribute more toward their retirement. The committee approved a phase-in, increasing the contribution from 6.5 percent of their salary to 7.5 percent over two years, instead of in one shot July 1.

That was the only change to a plan crafted by a bipartisan panel over months of meetings.

Rep. Jim Merrill, the panel's chairman, noted the plan as originally drafted included many more changes, but after conferring with financial consultants, the panel backed out of various pieces not considered necessary for the system's solvency, such as requiring employees to work until age 62 and applying the additional two years of work requirement to current employees.

"If we had our druthers, everything would be hunky dory from the get-go, but it's not. To do nothing is punting, is abdicating our responsibility," said Merrill, R-Charleston. "The original bill was far, far more stringent than this."

The committee shot down efforts from House Minority Leader Harry Ott to exempt employees within 10 years or five years of retirement. Ott said those employees have begun makingretirement plans, and South Carolina shouldn't renege on its promises to them.

House Majority Leader Kenny Bingham, also a member of the study committee, said while that may the more popular thing to do, the Legislature must make tough decisions to ensure employees receive their checks decades from now.

"The sooner we take corrective action, the less painful the decisions are," said Bingham, R-Cayce. "There's no hero here. The only hero here is down the road when people receive their benefits. If we do nothing substantive, we may as well punt and watch it collapse."

Rep. Gilda Cobb-Hunter, D-Orangeburg, said her phase-in amendment allows state employees to plan for the increase. Without the phase-in, the required contribution would gobble up half of the additional take-home pay in employees' checks proposed in the committee's budget plan for 2012-13, which will be debated on the House floor next week. It includes a 2 percent salary increase for state workers, who haven't seen a raise in four years.

Financial consultants confirmed the impact to the system of phasing in the increased contribution over two years, rather than immediately, would be negligible, said Merrill, urging support for the change.

The bill also locks in the increase in employers' contribution to workers' pension, which the Budget and Control Board voted last November to increase by one percentage point to 10.6 percent. The committee's budget plan for 2012-13 covers that additional cost for state agencies and districts.

Other parts of the bill are meant to prevent what's called spiking. Benefits would be based on employees' last five years of pay, rather than three. Money paid for unused vacation and sick days at careers' end couldn't be rolled into benefit calculations.

The Palmetto Teachers Association believes employees within five years of retirement should be exempted from those changes, while the South Carolina Education Association wants all current employees exempted from them.

Another section of the bill prevents employees from using overtime or any other bonuses in their retirement calculations.

Most of the changes affect both the state's main retirement system for employees of state agencies, school districts and local governments that want to participate, as well as the separate retirement system for law enforcement and firefighters around the state. Two changes, however, do not: The requirement to work 30 years and overtime clause. Employees under that system can still retire after 25 years.

Rep. Joe Neal, D-Hopkins, said the changes and increased contribution requirement will "inflict pain and damage on very vulnerable people."

The average salary for all employees who are paid at least partially through the state budget is $49,000. Nearly 56 percent of public employees earn less than $35,000 yearly, according to the state Budget and Control Board.

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